HerMoney Classic: Holiday Tipping 101
23:47 Share

You're listening to an Airwave Media Podcast. According to Deloitte, shoppers are expected to spend $1,700 on holiday gifting this year. That's a record high. It's also an 8% increase from last year. But here's the good news. With Ibotta, you can earn cash back to add some extra cushion to your holiday budget. It's simple. Just

Just add offers in the app, upload your receipt, and voila! The cashback is yours and you can transfer it to your bank or PayPal or redeem it for gift cards. On average, Ibotta users earn $256 a year, which can go a long way toward making those holidays a little more magical. And whatever you're buying, Ibotta gives you cashback on all of it so you can keep those cherished holiday traditions alive, old or new.

Right now, Ibotta is offering our listeners $5 just for trying Ibotta by using the code HERMONEY when you register. Just go to the App Store or Google Play Store and download the free Ibotta app to start earning cash back and use code HERMONEY. That's I-B-O-T-T-A in the Google Play or App Store. Use code HERMONEY.

With Amex Platinum, you get priority notified with global dining access by Resi, so you can get first dibs if a spot opens up at restaurants, and compliments to the chef turns into compliments to your Platinum card. That's the powerful backing of American Express. Terms apply. Learn more at AmericanExpress.com slash with Amex.

Hey everyone, I'm Jean Chatzky. Thanks so much for joining me today on Her Money. One of the things that I love most about the holiday season is that it's such an amazing opportunity to show gratitude to all of the important people in your life. That includes you.

buying the right gifts, of course, but it also includes tipping those people who provide services that you depend on. Your babysitter, the housekeeper, the server at your favorite restaurant, the people who work in your building. Including their tips in your holiday plans is a pretty easy way actually to show your appreciation for all that they do throughout the year. The

The thing is, just like buying the right gifts, giving the right tips gets complicated. Who do you tip? How much? How much for different services? Is it better to tip cash or a gift card?

or Venmo, and even though inflation has eased a bit this year, what do higher prices mean in terms of giving the right amount in tips and yet fitting those tips into your budgets? Yes, we all want to be as generous as we can, even during uncertain times, which is why we're talking during this episode about ways that we can make our tips more thoughtful, more intentional, and more effective.

To help us do all of that, we've got Barbara Sloan. Barbara spent two decades working in the service industry as a server and a bartender and a stripper. And during that time, she found there were not enough resources to help tip workers manage their money for their specific situations, which inspired her to become a personal finance coach and found her own company. It's called Tipped Finance.

She also wrote a book for people working in the service industry on how to save money and build wealth. It's called Tipped, The Life-Changing Guide to Financial Freedom for Waitresses, Bartenders, Strippers, and All Other Service Industry Professionals. Here's my conversation with Barbara. Barbara, welcome. So nice to have you here. Jean, thank you so much for such an amazing introduction. I'm so glad to be here.

Tell me a little more about you and your fascinating background. I know you've worked in so many different service jobs that relied on tips and you had to figure out how to manage your finances on your own. Tell us your story.

Yeah, so most people who meet me today know me as the owner of a women-owned construction company. But what they don't know is that I did spend those two decades working in the service industry, oftentimes in tandem and at large times solely working in the service industry. I got started working in the service industry in

Early on, I think my first job was at age 11. I was a paper girl. And so that job was on tips. I remember around the holidays getting singles or $5 bills as big holiday tips and feeling like I was rich.

And then my second job was an A&W, which we are from Michigan. I'm from Michigan as well. Yes, I know A&W. Yes. So the roller skating waitresses and serving hot dogs and root beers. So that was like one of my jobs while I was working in high school. When I was 12, my mom left our home and I was raised primarily by my dad who had some substance issues going on. At the age of 15, I moved out and

and became homeless and also was kicked out of my then high school due to not having a permanent address. And so my teenage years were tough. It sounds awful. It was a hard time. And then at 19, my dad, who I have so much love and respect for, he was an amazing person who just struggled. He ended up passing away and

I just grew really attached to the house that I grew up in and it ended up getting sold. And I was so upset that I wrote the new owners a letter and I was like, I cannot let this house go. I made an off. This was 2003. So they would give a mortgage to anybody. And I'm a great example of that. At 19, I wrote them a letter and I offered them twice the price that they purchased the house for. Wow.

got myself into a really bad financial position. Not only that, I took out 10 credit cards and I maxed them out renovating the house because I was working through my grief. I wanted to honor my dad and restore the house. And yeah, so I put myself into a really bad financial position. And a year later, the grief lifted and I was under a mountain of debt and realized that life was too short to

be this hard. And I ended up selling the house and kind of walking away from my dad at 19 and moving to California.

where my career more formally started in the service industry. Did you file bankruptcy at that point to walk away from it? No, I didn't know anything about bankruptcy. I just knew that I didn't know how to have conversations with creditors that I couldn't pay. I didn't know how to get out from underneath all of the debt that I had put myself in. None of that was modeled for me. Debt was modeled for me, but also homeownership was modeled for me, which was really great. That's how I got myself in that situation. But

No, we had no financial literacy. There were no conversations in school about how to stay out of debt or not take out credit cards or anything like that. So that just wasn't in my world at the time. And then when I got to California, I was like, I just needed something easy. I needed something light. And that was the service industry that was working in bars and restaurants felt easy. It felt nice. I had also come out at the age of 15 and working in the service industry was

was one place where you could truly be yourself. Yeah. It was the one industry where you were celebrated for being unique and maybe a little over the top or flashy or, you know, and so I loved it. I found my people in that industry. And so I'd also fallen in love with construction during the process of renovating that house. And so I leaned hard into both of those and worked in the service industry and in construction. I moved around the country a lot and I would always get a service industry job first

And it was always easy because that's one of the great aspects about the industry is that you can always find something. I am going to bring you back and we're going to do a whole show on your story because I'm just fascinated. But I want to talk actually about tipping and I want to talk about tipped workers and how the system is for workers who rely on tips. How do they have to approach their budget differently?

differently than people who are on a salary? People who work for tips have to approach money management in the same way that a business approaches money management. They have to be more educated and more diligent as somebody who's going to manage their money because

For most nine to fivers, the income side of their money management is fixed. They know how much money is coming in. Whereas people who are earning tips, they don't know how much they're going to be making. So both of their income and their expenses are fluctuating. And that's very similar to most businesses. Most businesses have fluctuating income. Most businesses have fluctuating expenses. And when you think about businesses, they have financial teams, they have accounting teams. And you as a person have to be all of that in one.

The first place you have to start is by recording your income. You have to know how much you're bringing in. Even if it's not consistent, there are always patterns. A lot of service jobs are seasonal, right? If you're in a club, for instance, clubs are always slower in the summer. Clubs are always slower during sporting events.

Whereas if you're in a bar that has a patio, it's going to be way busier in the summer months. Absolutely. If you're a tipped worker these days, whether you are

I guess it's probably different if you're a housekeeper versus somebody who works in the salon versus somebody who works in a bar or a restaurant. What's the range of the percentage of income that is tips rather than salary? It's very establishment and even state specific. So for people who are in a restaurant working in two very different states, they're going to have really different realities on one

One is going to be bringing home a substantial paycheck of a couple hundred dollars a week, whereas another person will not see a paycheck. So it's dependent on the establishment and the state that you're living in. So when we are approaching the holidays and we're thinking about tipping,

Do you have a philosophy about how we should approach it in general and then we can dig down and talk about the specifics? Yeah, I always like to say tipping should feel good. It should always feel good. I'm in the Facebook comments on a lot of posts and I will see people say,

Things like, oh, well, why should we have to pick up where their employer should take care of them? And what we often forget is that tipping is its own type of employment. Most people think that there's only either W-2 work or entrepreneurship gig consulting type work, but there's actually this third type of employment, which is tipped work. It's its own type of employment where there is a two-part process to the employee getting paid. One is

the minimum wage or in most places, it's a sub-minimum wage. But then the other side is the tip that they receive from the person that they're working with. And there are over 5.5 million people working on tips in the U.S. This is not a small industry that we are going to, we're not removing tipping. That's not changing. We're not getting rid of this practice. It's been around for hundreds of years. So I always like to say tipping should feel good

Because you should be reminding yourself that you're getting to participate in somebody's livelihood and that should make you feel good. I also like to say tip on service, not on product. So if you're at a coffee house, for instance, and you're getting a packaged coffee and a sandwich and that iPad gets turned around and the option for tipping comes up, you

You shouldn't feel obligated to tip in a situation like that. However, if somebody is making you a hot beverage that they can burn themselves on and they're drawing a cute little cat face on top of your latte, then that is a situation in which you're getting service and you should feel maybe inclined to tip in that situation. It's interesting because that iPad that spins around feels...

feels like it's spinning around more often, right? In places where I expect it at the coffee shop these days. I don't expect it in certain businesses that I, I was at a shoe repair place, right? I don't think I've been asked to tip in that situation before. I did. The guy did a very nice job on my shoes, so I tipped a little bit, but I was surprised to be asked.

Have you seen sort of tipping creep into other places where it didn't used to exist? Yes, definitely. And I think the iPad situation is we're all feeling that. And I think even people in the service industry are concerned about the increase of these iPads because I think a lot of people are just throwing their hands up in the air and saying, oh, you know, to heck with all of this, because the point of tipping is to subsidize somebody else's

income when they're providing a personalized service that their employer cannot

objectively review, right? And so if you're all in a football stadium watching a game, everyone's having the exact same experience. When you are at a table getting restaurant service, that's a very unique experience that no one is going to know how that went except for you. So I think, yeah, these iPads that are getting turned around in strange situations, we have to call out bad actors. But at the same time, it's new and we have to weed it out.

Today's podcast is sponsored by Midi Health. If you listened to our recent episode with Deb Whitman, author of The Next 50, you know turning 50 should be a milestone that is celebrated, not dreaded. It's a time to harness your momentum for a vibrant new chapter. But let's face it, there is a topic that can cast a shadow on this celebration, and it's menopause. How

Hot flashes, insomnia, brain fog, mood swings. Sound familiar? It sounds familiar to me. It is time to stop pushing through these symptoms alone. MidiHealth is here to change the conversation around menopause. Their team of expert clinicians provides personalized care plans to address symptoms like sleeplessness, weight changes, even the dreaded night sweats.

Midi provides FDA-approved solutions, a holistic approach, and virtual visits covered by most insurance. With Midi, it's easy to feel heard and to start feeling better. You deserve to feel great. Book your virtual visit today at joinmidi.com. That's joinmidi.com.

I'm talking with Barbara Sloan, founder of Tipped Finance and the author of the book, Tipped, The Life-Changing Guide to Financial Freedom for Waitresses, Bartenders, Strippers, and All Other Service Professionals. All right. So we are rolling into the holidays and we are also dealing with inflation and the fact that everything is a little bit more expensive these days.

Does this mean we should be tipping more when we can? Does it give us a reason to tip less because we can't? How do you deal with that? Yeah, I think in situations where

inflation is impacting the cost of goods and the goods are part of the service, then whenever you find yourself in a percentage situation, then likely the inflation has already been hit onto the good or services that is part of that service. And so if you just are tipping appropriately, I think

mostly you're covered. But I also think that it's a great time to maybe up that. And so, you know, if you were somebody who was in the range of 15 to 20%, then maybe you want to move your range up to 20 to 25%. The range for housekeepers, if you would go to a hotel, was always like $2 to $5 per night.

That's not on a percentage. So I think in that situation, it's a great time to up whatever your base was. I no longer leave less than $5 a night for my housekeepers. The price of the hotel has gone up, but tipping for housekeepers largely has not changed over the last two decades. So I think that's when you would want to modify that. How about other industries? I mean, I think that's a very helpful metric as far as the housekeepers at a hotel go.

How about at restaurants and the lawns and the people who work for you in your home? Yeah. So I think this is another great example. Like if you have a housekeeper and a housekeeper has been with you for a long time, this might be a good time for you to adjust their rate in general. And then if you are somebody who does do tipping around the holidays, I often encourage like a week.

of their salary. So if you were upping their salary to match inflation, then your tip would reflect that as well. And how about in salons and in restaurants? I mean, you mentioned going to 20 to 25%. I guess that's in a restaurant. What if you visit a hair salon every two months for each year and you've been seeing the same person for a while?

Yeah, if they haven't raised their rates in a while and you're somebody who has some room in your budget, you may want to go ahead. And these are typically, especially for beauty and body services, these are relationships that you've probably had for years. And so they may be uncomfortable raising their rates. And if you're somebody who's conscious of the environment and the economy that we're in right now, it might be on you to say, you know what, it's okay to raise your rates a little bit.

And then for tipping people in beauty and body services around the holidays, if you only see them every couple of months, usually what I do is I give them the equivalent of one service around the time of the holidays.

We talked a little bit earlier about modes of tipping, and I'd like to know what's most effective. I mean, different companies have different ways of collecting tips. My coffee place still has a cash jar in addition to the iPad. Some places ask for tips on credit cards. Some places don't want tips on credit cards and in fact tell you that you can't tip on the credit card. You have to tip in cash.

How is tip money distributed in these different situations? We have a place we park our car. I live in a city and I live in the city of Philadelphia and we don't have a garage in our building. So we park in a nearby garage and I just took over a holiday card with a gift for the guys who work there who are incredibly helpful. But I gave it to one of them and I said, you guys split this, right? And he said, yeah.

So I trusted and left the card and left. But, you know, it's always a question mark. Yeah. I mean...

The point of that situation is that you did your part and you should feel great about it. And hopefully it works out the way that it should. Not everything can be perfect. I'm in a similar situation. So I'm in a city, I'm in New York City. We have great mail people. We have mail people, different mail people for different, you know, UPS, FedEx, USPS. Around holiday time, I'll put $25 for people carrying letters and $50 in envelopes for people carrying packages. And I just stuff that into my mailbox for a week. And I'm like,

Hopefully that worked out. Hopefully it ended up where it should have ended up. And I've done my part. It can't be perfect, but the intention is there. Yeah. Yeah, absolutely. When it comes to those tip jars, I mean, does that usually get to the right place? And is it more effective to tip in cash than it is to tip on a credit card? Do the service workers take more home if I tip in cash? This is, again, very establishment specific. So

Some bars will pool their tips and they'll break it up at the end of the week. And so they want more credit cards in order to make sure that everybody's getting things fairly. And some servers prefer cash because they often have to tip out the maitre d' and the busboy and the barback. And it's easier for them to distribute that based on cash at the end of the night than taking it out of their own pocket. So each establishment can range in what they prefer. But I think it's great to ask.

Right. You're having this experience and likely whether it's a beauty body service or, you know, hospitality experience, you're engaging with people. Go ahead and ask the question. Do you prefer cash or credit? I'm going to give you a holiday tip. You can ask your hairstylist if they prefer a personalized gift or if they prefer cash. I think most people prefer cash, but it's great to have that conversation. It shows that you care.

Yeah, it does. For people who would really like to add a little more to their tips right now, but just aren't able to financially, is there any other way to show their appreciation? I think for people who are struggling, what they should probably look at is all of these services are luxury services. If you're able to afford the luxury service, you should be able to afford the tip.

Otherwise, in some situations, you could be forcing somebody to work for free or paying out on that service. Like we were talking about in the restaurants, a lot of people have to tip out. Hairstylists may have to tip out their shampoo or they may be paying for their own product. They may be paying for their own chair. If you're not tipping, you could be taking money out of their pocket. So I think if you're in a budget situation where you're feeling the strain, pull back on the number of luxury services that you're

you're participating in, you know, maybe less deliveries, maybe less going out to eat. You can always still have a great potluck or a picnic or there's lots of great packaged goods at the grocery store where you're not kind of exploiting somebody's labor and you can still have a great time. I encourage people to kind of think through those solutions.

Such interesting and really valuable information this time of year. Barbara, thank you so much. Where can our listeners find out more about you? Yeah, if anyone has any tipping etiquette questions, I'm always happy to chat. I get a lot of

texts, emails, and calls around this time of year, people asking me, what's the appropriate tip? So feel free to reach out to me, Barbara at tippedfinance.com. You can reach out to me at tippedfinance.com for one-on-one coaching, or I often do money talks at restaurant bars, clubs, or

your place of business. And then you can follow me on socials at tipped finance, or you can buy the book tipped, which is available on Amazon. Thank you so much, Barbara. Happy holidays to you. James, this is such a great conversation. Happy holidays. Thanks so much for joining me today on her money. If you love this episode, please give us a five star review on Apple podcasts. We always value your feedback. And if you want to keep the financial conversations going, join me for a deeper dive.

Her Money has two incredible programs, Finance Fix, which is an eight-week program designed to give you the ultimate money makeover, and Investing Fix, which is our investing club for women that meets biweekly on Zoom. With both programs, we are leveling the playing fields for women's financial confidence and power. I would love to see you there.

We'd like to thank our sponsor, Edelman Financial Engines. Her Money is produced by Haley Pascalides. Our music is provided by Video Helper and our show comes to you through Megaphone. This podcast is also part of the Airwave Media Podcast Network. You can find us and other shows like us at airwavemedia.com. Thanks for joining us and we'll talk soon.

I hate most business podcasts. It's all blah, blah, blah. Tell me your background. No, nobody has time for that. I'm Jason Pfeiffer, editor-in-chief of Entrepreneur Magazine and host of the podcast Problem Solvers. So I know you are busy running a business and you just need answers and I find them.

Want to increase trust as a leader? I talked to Whole Foods co-founder John Mackey. Want to manage your time better? I talked to Google's in-house productivity expert. Straight to the point, 30 minutes or less, just search for problem solvers.